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Food prices are on the rise despite the naira rally as the US set to issue T-bills

Food prices are on the rise despite the naira rally as the US set to issue T-bills

By Eniola Olatunji and Wasiu Alli

Despite the naira’s rebound, food prices have remained adamant, soaring to record as Nigerians are expected to see specific foods taking a chunk of their incomes.

Meanwhile, the United States will begin a three-month and six-month treasury bill auction in a race to raise capital.

Read also: Food prices remain high despite steep decline in forex

April 21, 2024

Selected food prices March 2024

The National Bureau of Statistics will release selected food prices for March 2024 on Monday.

The food inflation rate rose from 37.92 percent in February to 40.01 percent in March, the highest ever recorded in the country. This surge has seen food prices skyrocket, leading to a pronounced rise in the cost of living crisis.

The key drivers of this inflationary pressure include notable price hikes in essential food commodities such as garri, bread and cereals, potatoes, yams and other tubers, oils and fats, fish, meat, and fruits, as well as coffee, tea, and cocoa.

The top 10 food items that have recorded the highest price increase in one year as of February 2024, according to the selected food price report of the NBS, were beef, rice, beans, onion, white garri, yam, tomato, unripe plantains, and bread.

Read also: Global food prices surge for first time in seven months

Transport Fare Watch (March 2024)

The National Bureau of Statistics will release Transport Fare Watch for March 2024 on Monday.

In February, NBS reported that travellers in the country paid N7,002.97 as transport fares for intercity bus journeys, representing a decline of 7.58 percent on a month-on-month basis compared to N7,577.03 in January 2024.

On a year-on-year basis, the fare rose by 75.48 percent from N3,999.70 in February 2023.

With the removal of the petrol subsidy, which cost the government N400 billion monthly in May 2023, by President Bola Tinubu, petrol prices have soared from N230 to N679, causing public transportation providers such as buses, tricycles, and motorcycles to raise transportation fares.

The rising fares have a direct impact on inflation, which has already been plaguing the Nigerian economy. With transportation costs eating into household budgets, the ability to afford necessities becomes increasingly difficult.

 “This surge has seen food prices skyrocket, leading to a pronounced rise in the cost of living crisis.”

US to auction a 3-month and 6-month bill on Monday

The United States will begin a three-month and six-month Treasury bill auction on Monday.

During the last three-month bill auction, the yield in the United States was 5.250 percent, slightly lower than the previous auction’s rate of 5.225 percent. While the six-month bill rate came in at 5.115 percent,.

Governments issue treasuries to borrow money to cover the gap between the amount they receive in taxes and the amount they spend to refinance existing debt and/or raise capital.

Despite the slight dip in yield, the auction continues to demonstrate investor confidence in U.S. Treasury bills, which are considered a safe haven asset for many investors. The consistent demand for these bills indicates ongoing stability in the U.S. financial markets.

The rate on a Treasury bill represents the return an investor will receive by holding the bill for its entire duration. All bidders receive the same rate at the highest accepted bid.

U.S. Treasury bills have maturities ranging from a few days to one year. Governments issue treasuries to borrow money to cover the gap between the amount they receive in taxes and the amount they spend to refinance existing debt and/or raise capital.

Read also: Prices of food, other commodities remain adamant despite dollar crash

April 24:

Federation Account Allocation Committee (FAAC) March 2024 Disbursement

The National Bureau of Statistics (NBS) will release its report on the Federal Account Allocation Committee for the month of March 2024.

According to the Bureau, the Federal Account Allocation Committee (FAAC) distributed N2.07 trillion in February 2024 from the total revenue collected in January 2024 among the Federal Government, States, and Local Government Councils.

It stated that the amount disbursed comprised N1.15 trillion recorded from the Statutory Account, N479.03 billion from Exchange Gain, N16.59 million from Electronic Money Transfer Levy, EMTL, and N420.73 billion from Value Added Tax.

The FAAC accrual has been on the rise since the second quarter of 2023, after the implementation of the twin policy reforms of the President Bola Tinubu administration—subsidy removal and liberalisation of the foreign exchange market.

April 25:

South Africa will release its Producer Price Index (PPI) for April.

South Africa will release its producer price index (PPI) on Thursday.

The country’s PPI stood at 4.5 percent in March, relative to 4.7 percent the previous month. Analysts see the figure hitting 4.9 percent in April.

The Producer Price Index (PPI) measures a change in input prices of raw, semi-finished, or finished goods and services. If input costs rise, some will be absorbed by the producer, and some will be passed on to the consumer.

Conversely, if input costs fall, some of the decline will be enjoyed as wider profit margins by the producer, and some will be passed on to the consumer in the form of lower prices. Because PPI impacts consumer prices, it is watched by central bankers as part of fulfilling their mandate of price stability.

A reading that is stronger than forecast is generally supportive (bullish) for the ZAR, while a weaker than forecast reading is generally negative (bearish) for the ZAR.

Read also: Garri has gone gold: Soaring prices leave Nigerians scrambling for staple food, experts blame gov’t, farmers greed

Naira to moderate around N1,000/$

The naira is expected to moderate around N1,000/$ after showing aggressive gains this week to a seven-month high of N1,020 per dollar on the black market.

A dollar sold for N1,072 last Wednesday on the official market, tilting towards convergence between the official window and the street.

Economists at Goldman Sachs see the naira extending a world-beating rally and say it will be the top-performing currency in the world in April.

The naira could also extend gains in the official market in the coming days, provided policymakers stay on track, according to a Goldman Sachs Group Inc. economist.